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Not even the implosion of Silicon Valley Bank, and the ensuing contagion that roiled broader tech and financial markets, could stymie developers’ commitment to web3. In fact, the opposite may be true despite some genuine headwinds.
Last quarter, ETH prices rebounded from June 2022 lows, and the number of web3 developer teams building on the Alchemy platform reached all-time highs. Developer activity surged across the board year-over-year, as the adoption of optimistic layer 2 rollups and new zero knowledge (zk) protocols supercharged the next chapter of Ethereum scaling.
For this quarter’s report, we examined cornerstone web3 metrics (namely libraries installs, smart contracts, and dapps) to get an unbiased view of developer activity across the ecosystem.
We then married those developer signals with marquee tech and web3 events like the SVB collapse, Arbitrum’s airdrop, and security breaches like Kevin Rose’s hack, to see how these events impacted one another and the industry in aggregate.
Let’s dive in!
Testnets offer a unique perspective on ecosystem health. As a “sandbox” for devs to test new dapps before deploying them into production, Goerli and Sepolia testnet activity is a strong indicator of what’s to come.
Here are the key takeaways:
Other hallmark metrics that point to an incremental upward trend include Ethereum SDK installs climbing 47% and wallet SDK installs soaring 788% Y/Y — an all-time high for wallet SDK installs.
The first quarter also saw a layer-2 and sidechain boom: activity across mainstays Arbitrum Optimism and Polygon showed strong growth with smart contracts deployed on the three networks growing 160% Y/Y. Similarly, Polygon zkEVM and zkSync launches in March resulted in immediate interest among developers and end-users.
First-party insights from Alchemy’s own ecosystem and community pointed to a groundswell of developer interest - with Alchemy University seeing 46K+ registrations for free web3 education courses during the quarter, and Alchemy Ventures startup investments remaining steady Q/Q.
All of these data points underscore web3’s long-term resiliency amid short-term market volatility, and its willingness to embrace new innovations and tools to solve web3’s growing pains. With major network upgrades like Shanghai taking effect, it’s difficult to imagine a future where the pace of innovation, and developer devotion to web3, decline.
This report aims to provide an accurate and useful representation of web3 development. The following sources were used for data collection purposes: Dune (verified smart contracts), DappRadar (dapp count), Github and NPM (SDK installations and metadata), CoinGecko (token prices), and npmtrends.com.
Developer sentiment and an increasing desire to learn about blockchain development signal growing interest in building web3 products. This section looks at a few areas of the ecosystem which can be used as proxies to highlight growing interest in web3 development.
Alchemy Ventures invests in the most promising web3 startups that are committed to building tools and infrastructure to help the entire blockchain industry scale.
The types of web3 startups raising money in 2023 are DeFi startups (26%), developer tooling companies (25%), account abstraction startups (16%), infrastructure providers (13%), zero knowledge technologies (10%), and rollups-as-a-service (RaaS) companies (10%).
Some of Alchemy’s Q1 2023 investments include:
In addition to a consistent number of investments since Q1 2022, Alchemy Ventures launched a web3 accelerator program to incubate pre-seed startups.
Over 46,000 people enrolled in Alchemy University, 25,000 students registered in Q1 2023, and 20,000 students are currently completing the curriculum.
Launched in October 2022 for Early Access students, Alchemy University is now open to the public. Every aspiring web3 developer can now learn Solidity for free with friends at AU.
In Q4 2022, Alchemy launched the Alchemy Dapp Store, a directory of web3 developer tools and consumer applications to help increase the visibility of projects.
To celebrate the best applications in web3, Alchemy hosted the first community choice awards for web3 called the Web3 30.
Over 500 projects were nominated and over 7,000 votes were cast, and eventually the top 30 were chosen. Winners included best-in-class dapps like Lens Protocol, and emerging platforms like Mirror World.
Create Web3 Dapp is a beginner-friendly developer tool that allows anyone to create a fully-functioning dapp in less than 4 minutes from their terminal.
With some many new web3 developers entering the industry, tools like Create Web3 Dapp have risen in popularity, leading to:
Before launching projects on testnets or mainnet blockchains, devs build on their personal computers (i.e. locally) to test and iterate before shipping.
Ethereum SDKs like Ethers.js, Web3.js, Hardhat and Web3.py grew 8% Q/Q with a total of 1.9 million downloads in Q1 2023, which is up 46% compared to Q1 2022.
Web3 wallet SDK installs grew 33% Q/Q in Q1 2023 with a total of 438,500 weekly downloads, and increased over 350% since Q1 2022.
Wallet SDKs analyzed include Coinbase Wallet, Rainbow, Web3 Onboard, and Web3 Modal which developers use to connect consumers to the Ethereum blockchain.
As more use cases for web3 emerge, a greater number of decentralized applications need an interface for customers to connect their wallet to their dapp.
Wallet SDKs are developer-friendly ways for engineers to add wallet support for their dapp, signaling an increase of new dapps entering the market.
After testing locally, web3 devs typically deploy applications on test networks (i.e. testnets) to test, iterate, and refine their product on a blockchain that mirrors a production environment without spending real ETH tokens which cost engineers money.
In Q1 2023 the Goerli testnet saw a 577% year-over-year increase compared to Q1 2022. Compared to Q4 2022, Goerli experienced a 46% decrease in smart contract deployments.
The headwinds of the Goerli ETH token supply shortages and new liquid price markets (i.e. developers having to pay for test ETH) have slowed down Goerli app development.
While the Y/Y increase of smart contract deployments on Goerli signals strong developer growth, the supply crunch is encouraging more developers to migrate to Sepolia.
Since its launch in March 2023, Alchemy’s Sepolia faucet has seen all-time-highs of over 70,000 daily active website visitors, signaling a massive demand for free test ETH.
Developers are migrating their smart contract testing activities to new testnets like Sepolia which don’t have the same fixed-supply limitations or liquid price markets.
One reason why Sepolia traction is not faster may be because important smart contracts that developers interact with are still only deployed on Goerli, meaning devs cannot adequately test their applications on Sepolia.
Once developers sufficiently test their applications on testnets, developers deploy their smart contracts on the Ethereum Mainnet to serve real users in a production environment.
Ethereum smart contract deployments grew 48% year-over-year compared to Q1 2022, and decreased 53% Q/Q compared to Q4 2022.
The anomaly spike in Q4 2022 was predominantly driven by a single EOA account with a negative difference of 2 million smart contracts from Q4 2022 to Q1 2023. The EOA account is called Cointool Xen Batcher that creates multiple contracts every time it is interacted with.
Adjusting for this outlier, the Q/Q difference would be -19% (2.1M in Q1 2023 vs. 2.6M in Q4 2022) compared to -53% if the outlier’s additional 2M contracts were included.
Smart contracts on layer 2 (L2) blockchains like Optimism, Arbitrum, and sidechains like Polygon grew 160% Y/Y compared to Q1 2022, and saw a 30% decrease compared to Q4 2022.
With cheaper transaction fees, faster confirmation times, and more users, developers deploying apps on L2s and sidechains continues to show a promising upward trend.
Users bridging tokens to layer 2s grew 44% Q/Q compared to Q4 2022, and saw a 518% increase Y/Y compared to Q1 2022.
More bridging to L2s suggests cheaper, more scalable blockchains are resonating with end-users vs. using mainnet applications.
With the second Optimism airdrop and the first Arbitrum token airdrop happening in Q1 2023, users are bridging tokens to L2s and using applications to receive airdropped tokens.
As web3 products attract real users and find product-market fit, developers need to scale their systems to support the increased consumer demand.
In Q1 2023, active Polygon developer teams building on Alchemy grew 116% Y/Y since Q1 2022. Polygon builders also grew:
In addition to the total number of creators (i.e. a wallet address that deployed a smart contract) building on Polygon has grown, in Q1 2023 the average number of smart contracts deployed by creators approximately tripled from just over 2 contracts to over 6 contracts/creator.
In Q1 2023 active Arbitrum developer teams building on Alchemy grew 2,779% Y/Y since Q1 2022. Arbitrum devs also grew:
In Q1 2023 Arbitrum’s airdrop of their $ARB token generated a 3X increase in daily active teams using Arbitrum on Alchemy in March 2023.
In Q1 2023 active Optimism development teams building on Alchemy grew 2,779% Y/Y since Q1 2022. Optimism developers also grew:
In Q1 2023 Optimism’s second $OP token airdrop delivered 10 million $OP tokens to 195 teams in their Retroactive Public Goods Funding program, which provides grants to projects contributing meaningful value to the Optimism ecosystem.
As another signal of growth, over 500,000 attestations have been made since the start of 2023. Attestations are statements by a creator about a subject, which are used as a sybil resistant identity solution for participants on the Optimism network.
In Q1 2023 active Solana dev teams building on Alchemy grew 17% Y/Y since Q1 2022, and free tier teams saw an 18% Y/Y growth rate.
Another signal of Solana developer growth is the attendance of the latest Solana hackathon, Grizzlython. Grizzlython is Solana’s largest hackathon to date, and was attended by over 10,000 builders, which submitted a record 813 final projects.
Despite the bear market, devs are still building on Solana hackathons, and the Grizzlython is a great example showing the resilience and bullishness of Solana developers.
In Q1 2023 DappRadar saw a 9% Q/Q growth rate of decentralized applications (dapps) totaling 17,564 dapps across all chains compared to Q4 2022.
The fastest growing categories for dapps on DappRadar include:
Silicon Valley Bank, Zero Knowledge L2s, and wallet hacks helped define the narrative in the first quarter or 2023. Here are some insights on defining moments in the first 3 months!
On March 11th, one day after the collapse of Silicon Valley Bank and takeover by the FDIC, trading volume of Uniswap’s decentralized exchange hit ATHs.
The elevated trading volumes on Uniswap was largely driven by traders selling USDC and buying other stablecoins like USDT (Tether) and DAI because ~$3 billion worth of assets that backed USD Coin were held in Silicon Valley Bank.
Polygon zkEVM and zkSync Era launched their layer 2 Ethereum scaling solutions in Q1 2023, and welcomed in a new generation of rollups built on Zero Knowledge proofs.
zkSync Era went live on March 24th, and by the end of the quarter, saw over 200M in total value locked (TVL) on mainnet.
Polygon zkEVm went live on March 27th, and by the end of the quarter, saw over 6,000 depositors.
On January 26th, Kevin Rose, the popular NFT creator behind Moonbirds and the Proof Collective, had a large collection of NFTs stolen (including 25 Chromie Squiggles) from his wallet because of a bad smart contract.
In the weeks after the hack, web3 security tools like Alchemy’s suite of Transaction Simulation APIs gained traction from wallet developers to give users more confidence.
Despite market headwinds, web3 gaming startup Planet IX continued to ship new features, retain an active base of players, and increase on-chain transactions.
Planet IX is an NFT-based strategy game on Polygon, where players restore a fallen planet through collecting NFTs, developing new territories, and gaining in-game leverage.
In Q1 2023, Planet IX had over 200,000 weekly active users (WAUs), and processed close to 35 million transactions which resulted in over 1.2M in gas.
This report is for informational purposes and does not constitute investment, legal, or tax advice. You should not put undue reliance onany statements of historical trends or interpret them as guarantees of future performance or results.
In addition to providing information based on our internal sources, this report contains statistical data and estimates that are based onpublic information. You should not give undue weight to such data or estimates as we have not verified them.
We make no representations or warranties as to the accuracy or completeness of the data presented nor do we commit to updating such data after the date of this report. By reviewing, sending, receiving, or sharing this report, you acknowledge that you will be solely responsible for your own assessment of the market, our company, and the other organizations mentioned, and you will conduct your own analysis and be solely responsible for forming your own view of any potential future performance.
As indicated on our website (www.Alchemy.com), we have a business relationship with certain chains including Ethereum, Polygon,Optimism, Arbitrum, and Solana. However, this report is not intended to promote the token of any particular chain.
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